Qatar Energy is set to acquire a 17% stake in two Shell-operated oil and gas exploration blocks in the Red Sea, the oil supermajor announced yesterday in a statement. The agreement, which is subject to government and regulatory approval, signals the first entry by the Qatari energy giant into Egypt’s upstream oil and gas sector.

The details: Upon closing of the agreements, Shell will hold 43% of block three, Qatar Energy will hold 17%, BHP will hold 30%, while Egypt’s Tharwa Petroleum will hold 10%. At block four, Abu Dhabi’s Mubadala will hold 27%, Shell will hold 21%, BHP will hold 25%, QatarEnergy will hold 17%, and Tharwa will hold 10%.

What’s next? The agreement is still subject to customary approvals from the Madbouly government and is expected to be concluded within the next few months, Shell told Enterprise.

The agreement comes a few months after the company sold its onshore oil and gas assets in the Western Desert to Cheiron Petroleum and Cairn Energy as it shifts its focus more towards offshore gas. Thirteen onshore concessions were acquired by the two companies in a transaction that could be worth up to USD 926 mn.

Don’t take this as a sign that Shell is farming out of Egypt: The Dutch company has no plans to exit the Egyptian market and will remain the main operator of blocks three and four, Shell Communications Manager Sherine Nehad told Enterprise. “Bringing a partner into our concessions is part of our global exploration strategy and a common industry practice to share costs and expertise,” she said.

This isn’t the first time Shell has diluted its interest in the blocks: Having owned 90% of both blocks when it was awarded exploration rights in a 2019 bid round, Shell has sold shares to several companies this year, trimming its ownership substantially in both blocks. Agreements with Abu Dhabi’s Mubadala Petroleum (pdf) and BHP Petroleum (which is still waiting on regulatory approval) reduced its holdings in Block 3 to 60% and Block 4 to 38%.

Shell’s upcoming plans for the Red Sea blocks: The energy giant’s exploration program covers an initial three-year term, and consists of a seismic acquisition program in block four and geological studies in block three. The company expects to conduct a 3D seismic survey in 1Q2022 and they have a drilling program planned for 2022 and 2023, Shell told Enterprise.

Proof we’re turning over a new leaf with Qatar? The acquisition signals the strengthening of Egypt-Qatari ties, after the two countries re-established diplomatic ties earlier this year. Qatar’s Energy Affairs Minister and Qatar Energy CEO Saad Sherida Al Kaabbi thanking the Egyptian authorities for “their valuable support and cooperation” in a statement.

Qatari entities have limited involvement in Egypt’s strategic energy sector, and until now have been largely confined to Qatar Energy’s minority ownership of Qalaa Holdings’ Egyptian Refining Company and the Qatar Investment Authority’s indirect stake in the Zohr gas field via its holdings in Russian petroleum company Rosneft.